Historic legacy and path dependency

Long historic legacies of the institutions that were used to promote Communism are thought to slow down reform. Part of the reason is that it is thought that when individuals spend many years in Communist systems they lose the social capital and human capital skills that are needed in market economies. Rules and regulations also most likely have emerged which are often incompatible with running modern, market economies. However, having a long history of Communism can also have benefits for implementing complex property rights reforms. For example, ties to previous property rights are more likely to have been erased and reformers are not faced with difficult issues of restitution of property.

The determinants of certain reforms, at times, may be somewhat path dependent. That is, because a certain set of actions were taken at some time in the past, there is more of a likelihood that a future course of reform will unfold. For example, because Communist officials in Poland decided to stay with individual farming even during the Socialist period, their farm restructuring problem was trivial. The implementation of one reform could also eliminate the pressures that were building to push forward other reforms. It is in this sense that we use the term path dependency. It should be recognized that the presence of the forces of path dependency may increase the likelihood of a subsequent event or action, but this should not be equated with inevitability. Indeed, the forces of path dependency should be treated as one of many factors that can affect the decisions of reformers.

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